What constitutes 'Gross Sales' for a Black Bear Diner franchise when calculating the Royalty fee?

According to Black Bear Diner's 2025 Franchise Disclosure Document, the royalty fee is 4.5% of Gross Sales, payable weekly. Gross Sales is comprehensively defined in the FDD to include all revenue sources connected to the franchised restaurant. This definition is important because it determines the base upon which the royalty fee is calculated, directly impacting the franchisee's ongoing costs.

Specifically, Gross Sales encompasses the total amount of all revenues received from the sale of all menu items, Gift Shop Products, banquet and catering services, and from all goods and services from any source connected with the Black Bear Diner restaurant. This includes all proceeds, regardless of whether payment is made via check, cash, credit, or other means. It also includes proceeds from any business interruption insurance.

However, the definition of Gross Sales also allows for some deductions. Franchisees can deduct sales tax collected from customers and paid to the appropriate taxing authorities, discounts deducted from the prices charged, and the price of employees' meals actually reported and paid. Understanding these inclusions and exclusions is crucial for a franchisee to accurately calculate and report Gross Sales, and consequently, the correct royalty fee owed to Black Bear Diner. Accurate reporting ensures compliance with the franchise agreement and avoids potential disputes or penalties.